Modelling the profitability of container shipping lines: Theory and empirical evidence

This paper contributes to maritime literature by constructing a theoretical model to empirically examine the determinants of profitability for container carriers. The findings show that theoretical derivations along are not sufficient to completely identify the impacts of changes in variables on the profitability of carriers. By contrast, empirical results of this study show that the impacts on the carriers’ profits are significantly positive with respect to regional economic growth, individual fleet expansion and technological progress, but significantly negative with respect to the expansion of regional fleet capacity and soaring fuel prices. Unexpectedly, growing vessel size brings an insignificant negative effect to the profitability of carriers. According to the implications derived from the theoretical model and empirical study, this study also suggests that quantity-oriented rather than price-oriented strategies will be more effective to improve the profitability of carriers. Emphasizing the effect of shipping alliances on market reactions to freight rate changes and on the improved chances to realize scale economies of larger ships, this paper also provides justification of government regulatory policies granting limited antitrust immunity for container shipping lines.